Daily Archives: February 23, 2009

Kate Mackenzie

Rachel Ziemba at RGE Monitor looks at China’s recent resources buying spree. The first part covers what is already generally known: indebted companies need the cash and it signifies an increase in government involvement in energy deals.

About halfway along, she looks at suggestions that China’s recent resources spree indicates a shift away from deals to invest in projects to getting the finished product – and how this coincides with less focus on Africa.

Ed Crooks

In its latest Monthly Oil Market Report, the Centre for Global Energy Studies points out that while oil demand has fallen fast in recent months, Opec supply has fallen even faster. That explains why the crude price has stabilised at about $40 per barrel.

Ed Crooks

Nuon, the other big Dutch utility remaining independent after Essent fell to RWE of Germany, has now accepted an offer from Vattenfall of Sweden, which is also big in Germany.

Ed Crooks

Seadrill

West Aquarius - Source: Seadrill

Seadrill, one of the world’s biggest offshore drilling rig contractors, has warned of charges of $810m to its fourth quarter results for various reasons, with the biggest item a $615m charge for falls in the value of its “strategic investments” in three other companies: Pride International Inc, Scorpion Offshore Limited and SapuraCrest Bhd.

Alf C Thorkildsen, CEO of Seadrill Management, says it has been an important part of the company’s history to take large stakes in other offshore drilling contractors “where attractive future value potential has been identified.” He adds that Seadrill “continues to see the investments in Pride, Scorpion and SapuraCrest as attractive long-term investments.” He goes on: “All three companies trade today at a large discount to the real value of the underlying assets [and] have strong cash-flows and good compositions of assets which match Seadrill’s strategic growth ambitions. The Board is hopeful that Seadrill through long-term holding of these positions can recover the recorded losses and over time also make these investments into profitable growth for Seadrill.”

Analysts at Citigroup are not so sure. In a note this morning, they write

We expect this news will be taken negatively by the market, as the losses relate to financial instruments, some of which lack visibility, and not the underlying operations of a drilling company. We expect the company will need to be more transparent with the market regarding its strategy regarding drilling asset stakes…”

Seadrill shares are down 5 per cent at about 2.25pm in Oslo. They are down 63 per cent in the past six months.

Carola Hoyos

On Energy Source today:

A turning point for US-China relations on emissions?

Spring and scary skinny demand

Falling in love with biofuels again

Elsewhere:

- Coal: A guide to historic coal mining

- Gasoline prices: Set a $4 floor to avoid storing up problems

- Biotech: Crop scientists say seed companies are thwarting research into GM effectiveness and impact

- Scientists: UK engineers call for government to accept climate change is inevitable; design new cities and water-distribution methods

- Natural gas: Unconfirmed report Exxonmobil agrees to sell PetroChina 2m tonnes of liquefied natural gas per year for 20 to 25 years from the Australian Gorgon project

- Peak energy: Could it be good news for the environment?

- Energy conservation: Several households try to reduce carbon emissions by 80%

- Electric Vehicles: Australian head of Better Place on plans for 500 battery exchange stations

Kate Mackenzie

Energy was the main topic of US Secretary of State’s meeting on Saturday with China’s President Hu Jintao. The China Environmental Law blog focuses on parts of the dialogue that seemed to indicate the US was countering “the standard argument of China and other annex 1 countries – that “developing” countries should be permitted to emit carbon with impunity” because the developed world did so.

The main theme: China, which last year overtook the US in carbon emission levels in large part due to its coal-fired power plants, cannot be let off the hook just because developed countries were once free to pollute in ignorance.

Kate Mackenzie

When the weather warms up in the US after this colder than usual winter, Tom Kloza wonders if it will it reveal a ‘scary skinny’ anorexic demand for oil? Though prices surged from new year’s day to President’s Day, last week they again began to fall – and it’s not even March. His analogy works like this:

Think about it this way.If you run into Lindsay Lohan in the depth of winter on the streets of New York, you are likely to see her clothed in heavy garments – - fashionable, of course – and think that nothing is amiss. Similarly, the Olsen Twins might be clad in an assortment of heavy coats, scarves, and layers when they venture into the city to check on the tens of millions of dollars they made on the backs of Moms and Dads paying for G-rated videos that could keep their toddlers off the streets. (I am a bitter parent).

As long as it’s cold, the clothes obscure what’s underneath. With warmer temperatures come more revealing garments. Already, there is concern that Ms. Lohan is “scary skinny” according to those impeccable scribes at E! Online, The Daily News, and even The Times of India.

Tom Kloza, according to his about page, is an analyst/professional pundit and longtime journalist focusing on downstream oil markets.

Kate Mackenzie

European energy commissioner Andris Piebalgs went to see Brazil’s biofuels in action to for himself and is rhapsodic about what he discovered.

The vast majority of cars sold in Brazil in recent years are ‘flex fuel vehicles’ (FFVs) – they can switch between ethanol or gasoline. About 7m flex cars are on the road today.

Brazil, Piebalgs says, shows biofuels are not always bad. The country was able to avoid the effects of the oil price spike last year, and only 2% of its arable land was used to grow sugar cane, the source of its ethanol. Even the Amazon is safe, he says, as 99.7% of sugar cane is grown more than 2,000km from the region.

What about CO2 emissions? Nobody disputes nowadays that sugarcane can save up to 80% of CO2 if we compare it with the best of petrols (the sweet and light crude). But what I discovered in Brazil, is that the remaining of ethanol is used to produce electricity. Cane trash recovery and use for power is already being done. If we take into consideration the savings of CO2 of this electricity (it would have been produced otherwise, for instance with gas, coal or oil), savings of bioethanol can go as far as 130%!!!

More data about Brazil’s auto landscape (in Spanish)

Energy news from the FT:

- Lex: Enel and Endesa
The deal serves both sides well

- Enel agrees €11bn deal for Endesa control
Deal marks final stage in three-year battle for Spanish electricity generator

- Shell to lend Nigeria $3bn
Unusual move reflects company’s reliance on Nigeria

- Anglo American defends dividend and job cuts
Group unveils 2 per cent fall in pre-tax profits

Energy news headlines from elsewhere:

- Diesel to dip below gas as Valero output rises (Bloomberg)

- USGS study may be ‘de facto’ moratorium on Outer Continental Shelf drilling: API (Platts)

- Total explosion trial comes as record profits sour public image (Bloomberg)

- Shell Australia refinery workers reject labor offer (Bloomberg)

- China oil firms could get foreign exchange to invest abroad, report says (Reuters)

- France’s Areva feels its power wane (WSJ)

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